An Empirical Study of Observational Learning

66 Pages Posted: 20 Sep 2013 Last revised: 13 Jun 2015

See all articles by Peter Newberry

Peter Newberry

University of Georgia - C. Herman and Mary Virginia Terry College of Business - Department of Economics

Date Written: May 28, 2015

Abstract

This paper is an empirical examination of observational learning. Using data from an online market for music, I find that observational learning benefits consumers, producers of high-quality music, and the online platform. I also study the role of pricing as a friction to the learning pro- cess by comparing outcomes under demand-based pricing to counterfactual pricing schemes. I find that employing a fixed price (the industry standard) can hamper learning by reducing the incentive to experiment, resulting in less consumer surplus, but more expected revenue for the platform.

Keywords: Observational Learning, Online Markets, Recorded Music, Search Goods, Demand-Based Pricing

JEL Classification: L15, L82, M31, D83

Suggested Citation

Newberry, Peter, An Empirical Study of Observational Learning (May 28, 2015). Available at SSRN: https://ssrn.com/abstract=2327814 or http://dx.doi.org/10.2139/ssrn.2327814

Peter Newberry (Contact Author)

University of Georgia - C. Herman and Mary Virginia Terry College of Business - Department of Economics ( email )

Athens, GA 30602-6254
United States

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